Commercial & Business, Insights

Retail Payment System Bill Enacted

Small merchant businesses often struggle with the burden of service fees for using retail payment networks such as Visa and Mastercard. Now, the Government has stepped in to help, and the Retail Payment System Bill (‘the Bill’) was enacted on 13 May 2022. The Bill aims to relieve a “disproportionate burden” on merchants as well as provide greater regulation and oversight over the retail payment system in New Zealand.

The Bill introduces three key changes to the old regime. First, it provides for the ‘designation’ of specific retail networks for regulation under the new regime. The designation process begins with the Commerce Commission recommending networks for designation to the responsible Minister, who must then recommend designation to the Governor-General. The Governor-General will then declare it, by an Order in Council, to be a ‘designated network’. The Visa and Mastercard networks will be initially designated as regulated retail payment networks under the regime.

Second, the Bill introduces initial pricing standards for designated networks, including caps on interchange fees. These are a major component of the service fees that merchants pay to their acquirer bank when their customers make credit or debit card payments. The interchange fees for New Zealand non-commercial credit payment products must be lowered to either 0.8% or the fees as at 1 April 2021, whichever is less. Fees for contactless credit cards will be capped at either 0.2% or 5c per transaction, whichever is less. Fees for online or any other type of transaction will be capped at 0.6%. The initial pricing standards will come into effect on 13 November 2022.

The Commerce Commission will be given various functions and powers to regulate retail payment networks. This includes issuing network standards for information disclosure and pricing, and requirements for enabling access to enter the infrastructure or services of a network. The Commission may also issue merchant surcharging standards to prevent merchants passing on excessive surcharges to customers. The Bill clarifies that merchant surcharges for payment services should be “no more than the cost to the merchant”.

The Retail Payment System Bill is intended to protect small businesses. It is part of a suite of changes proposed by the Government including Unfair Contract Terms protections for small trade contracts. Network operators and card issuers will have a short window of six months to ensure their interchange fees comply with the new standards.